(a) From January 1, 2002, until January 1, 2007, an affiliated retail electric provider shall make available to residential and small commercial customers of its affiliated transmission and distribution utility rates that, on a bundled basis, are six percent less than the affiliated electric utility’s corresponding average residential and small commercial rates, on a bundled basis, that were in effect on January 1, 1999, adjusted to reflect the fuel factor determined as provided by Subsection (b) and adjusted for any base rate reduction as stipulated to by an electric utility in a proceeding for which a final order had not been issued by January 1, 1999. These rates on a bundled basis shall be known as the “price to beat” for residential and small commercial customers, except that the “price to beat” for a utility is the rate in effect as a result of a settlement approved by the commission after January 1, 1999, if the commission determines that base rates for that utility have been reduced by more than 12 percent as a result of a final order issued by the commission after October 1, 1998.
(b) The commission shall determine the fuel factor for each electric utility as of December 31, 2001.

(c) After the date of customer choice, each affiliated power generation company shall file a final fuel reconciliation for the period ending the day before the date customer choice is introduced. The final fuel balance from that reconciliation shall be included in the true-up proceeding under § 39.262.
(d) An affiliated retail electric provider shall make public its price to beat in a manner that provides adequate disclosure as determined by the commission.
(e) The affiliated retail electric provider may not charge rates for residential or small commercial customers that are different from the price to beat until the earlier of 36 months after the date customer choice is introduced or:
(1) for service to residential customers, the date the commission determines that 40 percent or more of the electric power consumed by residential customers within the affiliated transmission and distribution utility’s certificated service area before the onset of customer choice is committed to be served by nonaffiliated retail electric providers; or
(2) for service to small commercial customers, the date the commission determines that 40 percent or more of the electric power consumed by small commercial customers within the affiliated transmission and distribution utility’s certificated service area before the onset of customer choice is committed to be served by nonaffiliated retail electric providers.
(f) Notwithstanding Subsection (e), the affiliated retail electric provider may charge rates that are different from the price to beat for service to aggregated loads of nonresidential customers having an aggregated peak demand greater than 1,000 kilowatts, provided that all affected customers are:
(1) commonly owned; or
(2) franchisees of the same franchisor.
(g) The affiliated retail electric provider may not encourage or provide an incentive to a customer to switch to a nonaffiliated retail electric provider, promote any nonaffiliated retail electric provider, or exchange customers with any nonaffiliated retail electric provider to comply with the requirements of Subsection (e)(1) or (2).
(h) The following standards shall be used for measuring electric power consumption during the period before the onset of customer choice:
(1) the consumption of residential and small commercial customers with an annual peak demand less than or equal to 20 kilowatts shall be based on the average annual consumption of those respective groups during the year 2000;
(2) consumption for all small commercial customers with an annual peak demand larger than 20 kilowatts shall be based on each customer’s usage during the year 2000; and
(3) for purposes of determining whether an affiliated retail electric provider has met the requirements of Subsection (e)(2), the aggregated loads of nonresidential customers having a peak demand greater than 1,000 kilowatts that are served by the affiliated retail electric provider at a rate different from the price to beat under Subsection (f) shall be deducted from the electric power consumption of small commercial customers during the period before the onset of customer choice.
(i) For purposes of Subsection (h)(2), if less than 12 months of consumption history exists for any such customer, the usage history shall be supplemented with the prior history of that customer’s location. For service to a new location, the annual consumption shall be determined as the transmission and distribution utility’s estimate of the maximum annual kilowatt demand used in sizing the electric service to that customer multiplied by 8,760 hours, and that product multiplied by the average annual customer load factor for small commercial customers with loads greater than 20 kilowatts for the year 2000.
(j) On determining that its affiliated retail electric provider has met the requirements of Subsection (e)(1) or (2), an electric utility or a transmission and distribution utility shall make a filing with the commission attesting to the fact that those requirements have been met and that the restrictions of Subsection (e)(1) or (2) and the true-up in § 39.262(e) are no longer applicable. The commission shall adopt appropriate procedures to enable it to accept or reject the filing within 30 days.
(k) Following the true-up proceedings conducted under § 39.262, the commission may adjust the price to beat.
(l) An affiliated retail electric provider may request that the commission adjust the fuel factor established under Subsection (b) not more than twice a year if the affiliated retail electric provider demonstrates that the existing fuel factor does not adequately reflect significant changes in the market price of natural gas and purchased energy used to serve retail customers.
(m) In a power region outside of ERCOT, if customer choice is introduced before the requirements of § 39.152(a) are met, an affiliated retail electric provider shall charge rates to customers other than residential and small commercial customers that are no higher than the rates that, on a bundled basis, were in effect on January 1, 1999, adjusted to reflect the fuel factor as provided by Subsection (b) and adjusted for any base rate reduction as stipulated to by an electric utility in a proceeding for which a final order had not been issued by January 1, 1999.
(n) Notwithstanding Subsection (a), in a power region outside of ERCOT, if customer choice is introduced before the requirements of § 39.152(a) are met, an affiliated retail electric provider shall continue to offer the price to beat to residential and small commercial customers, unless the price is changed by the commission in accordance with this chapter, until the later of 60 months after the date customer choice is introduced or the requirements of § 39.152(a) are met.
(o) In this section, “small commercial customer” means a commercial customer having a peak demand of 1,000 kilowatts or less.
(p) On finding that a retail electric provider will be unable to maintain its financial integrity if it complies with Subsection (a), the commission shall set the retail electric provider’s price to beat at the minimum level that will allow the retail electric provider to maintain its financial integrity. However, in no event shall the price to beat exceed the level of rates, on a bundled basis, charged by the affiliated electric utility on September 1, 1999, adjusted for fuel as provided by Subsection (b).